Q4 2012 www.businessmonitor.com AUSTRALIA INFORMATION TECHNOLOGY REPORT INCLUDES BMI'S FORECASTS ISSN 2041-7160 Published by Business Monitor International Ltd. AUSTRALIA INFORMATION TECHNOLOGY REPORT Q4 2012 INCLUDES 5-YEAR FORECASTS TO 2016 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: October 2012 Business Monitor International 85 Queen Victoria Street London EC4V 4AB UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2012 Business Monitor International. All rights reserved. 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All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained. Australia Information Technology Report Q4 2012 © Business Monitor International Ltd Page Australia Information Technology Report Q4 2012 CONTENTS Executive Summary . SWOT Analysis . Australia IT Sector SWOT . Australia Political SWOT Australia Economic SWOT Australia Business Environment SWOT . Asia Pacific IT Risk/Reward Ratings 10 Table: Asia Risk/Reward Ratings Q412 . 13 IT Markets Overview . 14 IT Penetration 14 IT Growth and Drivers 16 Sectors And Verticals . 18 Market Overview . 22 Government Authority 22 Software . 25 IT Services . 28 Industry Developments 29 Government's ICT Policy . 30 Healthcare IT . 30 Table: Computers For Schools Programme, Phase Two - Planned Spending By State . 31 Industry Forecast . 32 Table: Australia IT Sector - Historical Data & Forecasts, 2009-2016 34 Industry Forecast Internet . 35 Table: Telecoms Sector - Internet - Historical Data & Forecasts, 2009-2016 . 35 Competitive Landscape . 37 Computers 37 Software . 39 IT Services . 40 Internet Competitive Landscape 42 Table: Australia Dial-Up And Broadband Internet Subscriptions, 2009-2010 43 Table: Australian Broadband Market, June 2009-June 2010 46 Macroeconomic Forecast 54 Table: Australia - Economic Activity . 56 Company Profiles . 57 Hewlett-Packard 57 SAP 63 Microsoft Corporation . 66 Country Snapshot 71 Table: Australia's Population By Age Group, 1990-2020 ('000) . 72 © Business Monitor International Ltd Page Australia Information Technology Report Q4 2012 Table: Australia's Population By Age Group, 1990-2020 (% of total) . 73 Table: Australia's Key Population Ratios, 1990-2020 . 74 Table: Australia's Rural And Urban Population, 1990-2020 . 74 BMI Methodology . 75 How We Generate Our Industry Forecasts 75 IT Industry . 75 IT Ratings – Methodology 76 Table: IT Business Environment Indicators . 77 Weighting . 78 Table: Weighting Of Components 78 Sources 78 © Business Monitor International Ltd Page Australia Information Technology Report Q4 2012 Executive Summary BMI View: Australian IT sales are expected to reach US$21.9bn in 2012, up 3%, with the market continuing to offer opportunities, despite business concerns about the domestic carbon tax and the global economic situation. The government's ambitious broadband plans will drive development of Australia's digital economy and services such as online banking and shopping. Government tenders will drive considerable spending in future in areas such as education, e-government, transport, and healthcare. Growth areas in 2012 will include tablets and demand across market segments to take advantage of opportunities presented by cloud computing. Headline Expenditure Projections Computer hardware sales: US$9.5bn in 2011 to US$9.5bn in 2012, +0% in US dollar terms. Forecast in US dollar terms flat, but government programmes will help to shore up demand. Software sales: US$3.6bn in 2011 to US$3.7bn in 2012, +5% in US dollar terms. Forecast in US dollar terms upwardly revised and cloud-based delivery should boost sales of enterprise resource planning (ERP) and other e-business products to the small- and medium-sized enterprise (SME) market. IT Services sales: US$8.3bn in 2011 to US$8.7bn in 2012, +6% in US dollar terms. Forecast in US dollar terms upwardly revised, with cloud services a growth area as local companies try to use computing resources more effectively. Risk/Reward Ratings: Australia's score was 73.2 out of 100.0. Australia ranks second in our latest Asia region RRR table, still ahead of larger rivals such as China, India and Indonesia. Key Trends & Developments By 2012, a large number of organisations, across a wide range of Australian sectors, have moved to full cloud deployments. Australia's big four banks have been at the forefront of moves towards cloud computing after revaluating their IT spend during the economic downturn. In 2012 more leading Australian private and public sector organisations are expected to launch cloud initiatives, with surveys indicating that cloud computing is a key priority for Australian CIOs. Government subsidies of computers in education will provide support for the market. In 2011, national and state governments continued to roll out new initiatives, and the Victoria government has invested more than US$150mn in IT in schools. New South Wales and Queensland authorities were also rolling out IT for schools projects. © Business Monitor International Ltd Page Australia Information Technology Report Q4 2012 We expect the growing popularity of tablets to continue in 2012, with shipments reaching around 2mn units. By the end of 2012, it has been forecast that as many as 40% of Australians could be using a tablet PC, with population penetration at around 20%. On this forecast, the diffusion curve of tablets would be steeper than for almost any other consumer electronics product of recent years. © Business Monitor International Ltd Page Australia Information Technology Report Q4 2012 SWOT Analysis Australia IT Sector SWOT Strong government support for ICT programmes. IT-literate population. Strong financial sector. Relatively unaffected by global economic crisis compared with Europe and the US. Australia has a relatively mature domestic market, with relatively slow growth rates. Sensitive to volatility in the global economy. The National Broadband Network programme will have many direct and indirect benefits for the IT market. Phase two of the computers for schools project is expected to generate an additional US$800mn of spending. Other major IT projects in areas such as healthcare and smart cards. Green IT as companies look to make power savings. The biggest threat is the global economic slowdown affecting Australia's economic activity and leading to a scaling back of IT budgets. The cheaper Australian dollar will affect consumer and business demand in the import-dependent IT market. Australia is a mature democracy with a broadly stable party system. Economic stability over recent years supports the current political system and radical groups are unlikely to gain substantial support. Weaknesses As one of the region's largest and most stable states, the country attracts many refugees and economic migrants. The issue is a key source of domestic tension and one that is unlikely to disappear over the medium term. Opportunities Australia has historically enjoyed close military ties with the US. However, with the rise of regional economic powers such as China, it will need to balance competing military and economic ties. Threats Australia's early support for the US 'War on Terror', among other things, has made Australians abroad a target for Islamic extremists. Australia's close alliance with the US, particularly under John Howard, has left a lingering feeling among some Asian governments that it is America's 'deputy sheriff' in the region. Strengths Weaknesses Opportunities Threats Australia Political SWOT Strengths © Business Monitor International Ltd Page Australia Information Technology Report Q4 2012 Australia Economic SWOT Strengths Weaknesses Opportunities Threats A free-market economy supported by a highly educated workforce. Blessed with rich natural resources, Australia's economic activity will be augmented by commodity exports and the high investment inflows into the mining sector. The persistent current account deficit increases vulnerability to capital flows and, by extension, currency volatility. The export basket is highly concentrated in commodities, with the consequence that the economy and currency remain vulnerable to fluctuations in world prices for metals, coal and agricultural goods. The rapid expansion of Asian economies in recent years – notwithstanding the current global recession – offers new opportunities for diversifying trading ties from core European markets. A low level of government debt has provided a certain amount of flexibility in fiscal policy to support domestic demand through the downturn. The high level of private sector debt – especially mortgage loans – poses a threat to sustained growth. A collapse in exports from a drop in resource demand from China would severely impact headline GDP growth. Australia is vulnerable to extreme weather that may lead to droughts and floods, which have become increasingly severe in past years as a result of global climate change. © Business Monitor International Ltd Page Australia Information Technology Report Q4 2012 Australia Business Environment SWOT Strengths Weaknesses Opportunities Threats A highly educated workforce and comparatively modern transport infrastructure underpin economic prospects. A number of free trade agreements with countries such as New Zealand, Thailand and the US serve as a boon for trading activities. Despite its openness, Australia requires the Foreign Investment Review Board to approve any commercial real estate investment by a foreign company or individual valued at US$5mn or more. With a population of just over 22mn, the domestic consumer base is small by regional standards. Australia is currently in talks with China, Malaysia, the Gulf Co-operation Council, Indonesia, India, Japan and South Korea regarding potential bilateral free trade agreements. Upgrade and expansion of urban infrastructure will be needed to sustain population growth in Australia's main cities, providing opportunities for publicprivate partnerships in the future. The government is also targeting infrastructure improvements to rural areas. Corporate taxes for foreign investors in Australia remain higher than in other countries, even as the government has promised to gradually reduce rates over the medium term. Recent investment proposals by Chinese firms regarding the resource extraction sector have raised fears that strategic assets will be lost to foreign players. © Business Monitor International Ltd Page Australia Information Technology Report Q4 2012 human capital management solutions provider SuccessFactors. At the time of acquisition, SussessFactors was the second largest pure cloud application firm behind after Salesforce.com, with 3,500 clients and 15mn users in 168 countries, and strengthens SAP in the key growth area of cloud. SAP stressed that it sees the SuccessFactors acquisition delivering value as a standalone proposition, through synergies with SAP's existing product portfolio and through cross-sale opportunities. Co-CEO Bill McDermott stated that only 15% of SucessFactors' customer base are existing SAP customers, demonstrating the potential for cross-selling. In addition to acquisitions targeting mobility and cloud markets, SAP has developed new products in-house, most notably HANA in October 2010. HANA is a High-Performance Analytics Appliance, offering in-memory business intelligence analytics in real-time. In Q411 SAP reported that two-thirds of revenue growth came from new innovations such as HANA, mobility and cloud. New clients in the quarter included major internationals such as Verizon, Broadcom, Groupon, Tate & Lyle, Desano and Sharp. Strategy SAP wants to become the fastest growing database company in the world and is targeting revenue of EUR20bn by 2015 equating to 10% CAGR. It has identified software and softwarerelated service revenue growth to meet this target. Over the same period, it also wants to achieve a non-IFRS operating margin of 35%, by targeting increased efficiency across sales channels, services, support infrastructure and R&D. In terms of revenue, for the period to 2015, SAP has identified cloud, mobility and big data as the three areas to deliver additional growth. Taken together with SAP's existing target markets of business analytics, middleware and enterprise resource planning, it estimates it will be competing in a market worth a total of US$230bn by 2015. Having strengthened its cloud portfolio with the acquisition of SuccessFactors, SAP wants to take EUR2bn in revenue from cloud services in 2015, of which EUR1bn will come from SuccessFactors. Starting in 2012 cloud subscriptions and support will be reported as a separate financial indicator in SAP's quarterly results allowing for progress towards this target to be tracked. Big data and mobility are also growth markets, with mobility the most developed at the time of writing, with revenue reaching EUR110mn in Q411. Recent Financial SAP reported strong financial performance in 2011 with revenue increases across its Performance geographic footprint. Total revenue in Q411 increased 10.8% y-o-y to EUR4.498bn, with FY11 revenue increasing 14.2% to EUR14.231bn. Software and software- related service revenue, which accounted for 82.7% of total revenue in Q411, increased by 15.6% y-o-y to Q411, reaching EUR3.72bn. Meanwhile, professional service revenue, including consulting and training revenue, grew by 9.1% y-o-y to reach EUR778mn. According to SAP two-thirds of Q411 revenue growth came from net new innovation areas such as mobility and cloud. SAP reported growth in every part of its footprint with Americas revenue up 14.7% in 2011 to EUR5.09bn, Asia- Pacific revenue up 21.8% y-o-y to EUR2.15bn and EMEA revenue up 11.6% y-o-y to EUR6.989bn in 2011. [With EMEA, and specifically Europe, the largest single component of SAP's base, despite its global presence, it is significant that European revenue © Business Monitor International Ltd Page 64 Australia Information Technology Report Q4 2012 were up over 21% y-o-y, and, in those hardest hit countries such as Italy, Portugal and Spain, revenue growth averaged just over 20% y-o-y in 2011.][this sentence is a little confusing] SAP attributed this to its business focus on helping clients achieve cost efficiencies, and area that companies wish to focus on even in times of austerity. In terms of profit, operating profit increased 206.3% y-o-y to EUR1.67bn in Q411, and was up 88.3% y-o-y for FY11 at EUR4.879bn. This corresponds to an operating margin of 34.3% for 2011. Profit after tax increased slightly faster, reaching EUR3.44bn in 2011, up 89.8% y-o-y. Financial Data Company Details Revenue (2010): EUR12.46bn Revenue (2011): EUR14.23bn Revenue (Q111): EUR3.02bn Revenue (Q211): EUR3.3bn Revenue (Q311): EUR3.41bn Revenue (Q411): EUR4.5bn Operating Profit (2010): EUR2.59bn Operating Profit (2011): EUR4.88bn Operating Profit (Q111): EUR597mn Operating Profit (Q211): EUR857mn Operating Profit (Q311): EUR1.76bn Operating Profit (Q411): EUR1.67bn Net Income (Profit After Tax) (2008): EUR1.87bn Net Income (2010): EUR1.81bn Net Income (2011): EUR3.44bn Net Income (Q111): EUR403mn Net Income (Q211): EUR588mn Net Income (Q311): EUR1.25bn Net Income (Q411): EUR1.2bn SAP AG Dietmar-Hopp-Allee 16 69190 Walldorf Germany www.sap.com © Business Monitor International Ltd Page 65 Australia Information Technology Report Q4 2012 Microsoft Corporation Strengths Recent operating systems XP and Windows have proved popular. Strong grip on the desktop application market, with Microsoft Office holding over 90% of the office software market. Weaknesses Microsoft has received criticism in the past for problems with anticompetitive practices, stability, security and compatibility. Late entrant to the smartphone OS market sees it lag behind rivals Apple and Google. Opportunities Despite its relatively late entrance to the gaming services industry, the Xbox has enjoyed rapid success. The Windows Phone OS may yet gain a new lease of life through deployment on next-generation phones from Nokia. Interconnectivity between Microsoft's many different products and services will allow the company to capitalise strongly on its substantial investment in cloud computing. Microsoft's acquisition of Skype will further this ambition. Threats Windows division experienced a 6% decrease in Q411 revenue as PC sales fell. The economic downturn is leading customers to delay the purchase of such devices Rival Google has had a head start in the cloud computing sphere, which may mean Microsoft may miss out as devices with lower processing power become more popular, such as tablets and e-readers. Overview Microsoft Corporation develops, manufactures, licenses and supports a wide range of computing services. It was founded in 1975, and became the dominant player in the home computer market in the 1980s through its MS-DOS operating system. This was succeeded by Microsoft Windows. It also created Microsoft Office, the dominant player in the Office software suite. Microsoft is divided into five product divisions: Windows & Windows Live Division, Server and Tools, Online Services Division, Microsoft Business Division, and Entertainment and Devices Division. Windows & Windows Live Division Windows & Windows Live Division develops and markets PC operating systems, related software and online services, and PC hardware products. This division focuses on software, hardware and services designed to improve efficiency through extended browsing capabilities and operations across the user's hardware and software. The Windows Division consists of multiple editions of the Windows operating system, software and services through Windows Live and Microsoft PC hardware products. Server And Tools This area develops and markets technology and related services, with the aim to improve productivity and efficiency. Products and services under this divisioninclude Windows Server, © Business Monitor International Ltd Page 66 Australia Information Technology Report Q4 2012 Microsoft SQL Server, Windows Azure, Visual Studio, System Centre products, Windows Embedded device platforms and Enterprise Services. Enterprise Services comprise Premier product support services and Microsoft Consulting Services. It also covers developer tools, training and certification. Around 50% of this segment's revenue comes from multi-year volume licensing agreements, 30% is purchased through transactional volume licensing programs, retail packaged product and licences sold to OEMs, and the remainder comes from Enterprise Services. Online Services Division (OSD) The OSD develops and markets information and content designed to help simplify tasks and improve utility of online services. It also helps advertisers connect with their target audiences. OSD products include Bing, MSN, adCenter and advertiser tools. Bing and MSN generate revenue through the sale of search and display advertising, which accounts for nearly 100% of OSD's annual revenue. Microsoft Business Division (MBD) This division is the development and marketing arm for software and online services designed to increase productivity in teams, organisations and on a personal level. MBD offerings include Microsoft Office (comprising mainly SharePoint, Exchange, Lync and Office 365), which generates over 90% of MBD revenue. The other 10% comprises Microsoft Dynamics business solutions. Revenue is divided into business revenue, which includes Microsoft Office system revenue, generated through volume licensing agreements and Microsoft Dynamics revenue, and consumer revenue, which includes revenue from retail packaged product sales and OEM revenue. Entertainment and Devices Division (EDD) This area focuses on the development and marketing of entertainment and connectivity services. EDD products include the Xbox 360 (which includes gaming and entertainment consoles, Kinect, Xbox 360 video games, Xbox LIVE, and accessories). It also includes Mediaroom IPTV software, Skype and Windows Phone. Microsoft acquired Skype on October 13 2011. In Q112, the EDD recorded 8.2mn consoles sold, an increase of 25% y-o-y. Xbox live subscribers came to 40mn, up 33% y-o-y and the Kinect reached an installed base of 18mn units. Skype registered 200mn users. Strategy The main pinnacle of Microsoft's strategy is to increase connectivity between its products and services. Its main strategy for 2012 is expanding cloud computing, Windows Phone and the launch of Windows 8. All these elements are interconnected, and will become increasingly so. Cloud Computing and Interconnectivity In April 2011, Microsoft announced it was to spend 90%, or US$8.64bn, of its R&D budget on developing cloud computing services. Microsoft's shift towards Software-as-a-Service (SaaS) is enabling applications and services that historically have been separate to become more integrated, working to connect PCs, phones, cameras, game consoles and video and music players through client software and high-speed internet services using a combination of © Business Monitor International Ltd Page 67 Australia Information Technology Report Q4 2012 Windows, Windows Live and Windows Phone OS. Windows Phone The Windows Phone was released in Europe, Singapore, Australia, New Zealand, the US, Canada and Mexico in H210 and in Asia in H111. Microsoft and Nokia formed a strategic partnership in February 2011 to build a global mobile ecosystem based on complementary assets. Microsoft would provide developer tools, making it easier for application developers to leverage Nokia's global scale while Nokia's application and content store would be integrated into Microsoft Marketplace. The Windows Phone will play a prominent role in Microsoft's 2012 strategy. In December 2011, it revealed it was investing in a range of exclusive apps for the device, incompatible with other smartphones. The company hopes this exclusivity will tempt users to switch phones, although it has struggled to secure a number of apps popular on iOS, which will leave it disadvantaged. Windows There is also focus on Windows 8, the next version of the Windows Operating System. The beta version will be released in late February 2012. The company is aiming to have the product ready for general release in 2012, most likely Q312. Company History Microsoft was officially established on April 1975, by Paul Allen and Bill Gates, but entered the operating system business in 1980 with a version of Unix, called Xenix. They licensed this to hardware manufacturers such as Intel, Tandy and Altos. However, it was the DOS system that proved the key to Microsoft's success. In November 1980, IBM awarded a contract to Microsoft to provide a version of the system to be used in the upcoming IBM Personal Computer. While IBM rebranded the system PC-DOS, Microsoft retained ownership of the MS-DOS system, and it soon became the leading PC OS vendor. In 1984, the company released Microsoft Windows, a graphical extension for MS-DOS. In 1986, the company launched an IPO, which made 12,000 Microsoft employees instant millionaires. In 1990, the company launched the Microsoft Office suite, which joined Windows as being a dominant player in its field. However, this led to numerous legal wrangles, as Microsoft was accused of anticompetitive practices. As the internet began to gain popularity in 1995, the company expanded into computer networking and online services. In 2012 Microsoft released Windows 95, online service MSN and the web browser Internet Explorer, which makes the firm a pioneer in the internet era. The company moved into the video games market in 2001, with the release of the Xbox, providing a challenger to Sony and Nintendo in that market. In March 2004 the company was involved in an antitrust case against the EU which resulted in Microsoft paying EUR497mn for abuse of market dominance. The company was forced to produce new versions of Windows XP without Windows Media Player, Windows XP Home Edition N and Windows XP Professional N. Windows Vista and Microsoft 2007 were released in January 2007, which led to a record profit for Microsoft in that year. However, the legal wrangles continued and the company was fined © Business Monitor International Ltd Page 68 Australia Information Technology Report Q4 2012 an additional EUR899mn for lack of compliance with the 2004 ruling. Bill Gates stepped down as chief software architect in 2008, although continues to hold positions within the company to today. In 2008, the company launched its Azure Services Platform, its first foray into the cloud computing market. In 2010, it focused on reforming its operating system for mobile telephony, named Windows Phone OS, and refined its strategy for entering the smartphone industry. Financial Data Revenue (2010): US$66.69bn Revenue (2011): US$72.996bn Revenue (Q111): US$16.428bn Revenue (Q211): US$17.367bn Revenue (Q311): US$17.372bn Revenue (Q411): US$20.885bn Operating Profit (2010): US$26.384 Operating Profit (2011): US$28.571bn Operating Profit (Q111): US$5.709bn Operating Profit (Q211): US$6.171bn Operating Profit (Q311): US$7.203bn Operating Profit (Q411): US$7.994bn Net Income (2010): US$20.568bn Net Income (2011): US$23.974bn Net Income (Q111):US$5.232bn Net Income (Q211): US$5.874bn Net Income (Q311): US$7.203bn Net Income (Q411): US$6.624bn Employees (2011): 90,000 *nb the above data is for the calendar year - Microsoft reports data according to its financial year which ends June 30. So FYQ112=Q311 Operational Data Company Details Consoles Sold (Q411): 8.2mn Xbox Live Subscribers (Q411): 40mn Skype Subscribers (Q411): 200mn Microsoft Corporation © Business Monitor International Ltd Page 69 Australia Information Technology Report Q4 2012 One Microsoft Way Redmond Washington United States WA 98052 Click here to enter text. www.microsoft.com © Business Monitor International Ltd Page 70 Australia Information Technology Report Q4 2012 Country Snapshot Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only is the total population of a country a key variable in consumer demand, but an understanding of the demographic profile is key to understanding issues ranging from future population trends to productivity growth and government spending requirements. The accompanying charts detail Australia's population pyramid for 2011, the change in the structure of the population between 2011 and 2050 and the total population between 1990 and 2050, as well as life expectancy. The tables show key datapoints from all of these charts, in addition to important metrics including the dependency ratio and the urban/rural split. Source: World Bank, UN, BMI © Business Monitor International Ltd Page 71 Australia Information Technology Report Q4 2012 Table: Australia's Population By Age Group, 1990-2020 ('000) 1990 1995 2000 2005 2010 2012f 2015f 2020f 17,096 18,118 19,164 20,404 22,268 22,919 23,793 25,241 0-4 years 1,260 1,300 1,276 1,289 1,458 1,535 1,588 1,661 5-9 years 1,262 1,293 1,354 1,339 1,365 1,413 1,523 1,645 10-14 years 1,244 1,296 1,337 1,400 1,406 1,413 1,426 1,576 15-19 years 1,396 1,276 1,328 1,399 1,505 1,508 1,500 1,505 20-24 years 1,369 1,420 1,299 1,426 1,643 1,647 1,629 1,602 25-29 years 1,419 1,394 1,447 1,389 1,626 1,690 1,742 1,714 30-34 years 1,391 1,454 1,432 1,510 1,498 1,557 1,693 1,802 35-39 years 1,315 1,425 1,495 1,488 1,630 1,608 1,557 1,745 40-44 years 1,259 1,332 1,450 1,538 1,536 1,593 1,679 1,600 45-49 years 985 1,258 1,342 1,469 1,586 1,578 1,563 1,703 50-54 years 818 974 1,258 1,339 1,471 1,531 1,588 1,565 55-59 years 730 803 968 1,239 1,319 1,364 1,453 1,570 60-64 years 735 707 791 942 1,233 1,271 1,285 1,419 65-69 years 660 689 678 760 905 1,020 1,181 1,236 70-74 years 489 589 630 628 702 745 844 1,108 75+ years 765 907 1,079 1,247 1,387 1,444 1,543 1,790 Total years f = BMI forecast. Source: World Bank, UN, BMI © Business Monitor International Ltd Page 72 Australia Information Technology Report Q4 2012 Table: Australia's Population By Age Group, 1990-2020 (% of total) 1990 1995 2000 2005 2010 2012f 2015f 2020f 0-4 years 7.37 7.17 6.66 6.32 6.55 6.70 6.67 6.58 5-9 years 7.38 7.14 7.06 6.56 6.13 6.17 6.40 6.52 10-14 years 7.28 7.15 6.98 6.86 6.31 6.17 5.99 6.24 15-19 years 8.16 7.04 6.93 6.86 6.76 6.58 6.30 5.96 20-24 years 8.01 7.84 6.78 6.99 7.38 7.19 6.85 6.35 25-29 years 8.30 7.70 7.55 6.81 7.30 7.38 7.32 6.79 30-34 years 8.14 8.03 7.47 7.40 6.73 6.79 7.11 7.14 35-39 years 7.69 7.87 7.80 7.29 7.32 7.02 6.54 6.91 40-44 years 7.36 7.35 7.57 7.54 6.90 6.95 7.06 6.34 45-49 years 5.76 6.94 7.00 7.20 7.12 6.89 6.57 6.75 50-54 years 4.78 5.38 6.57 6.56 6.61 6.68 6.67 6.20 55-59 years 4.27 4.43 5.05 6.07 5.92 5.95 6.11 6.22 60-64 years 4.30 3.90 4.13 4.62 5.54 5.54 5.40 5.62 65-69 years 3.86 3.80 3.54 3.72 4.06 4.45 4.96 4.90 70-74 years 2.86 3.25 3.29 3.08 3.15 3.25 3.55 4.39 75+ years 4.48 5.00 5.63 6.11 6.23 6.30 6.49 7.09 f = BMI forecast. Source: World Bank, UN, BMI © Business Monitor International Ltd Page 73 Australia Information Technology Report Q4 2012 Table: Australia's Key Population Ratios, 1990-2020 1990 1995 2000 2005 2010 2012f 2015f 2020f Dependent ratio, % of total working age 49.7 50.4 49.6 48.5 48.0 49.3 51.7 55.6 Dependent population, total, '000 5,679 6,074 6,355 6,663 7,222 7,571 8,104 9,016 Active population, % of total 66.8 66.5 66.8 67.3 67.6 67.0 65.9 64.3 Active population, total, '000 11,417 12,045 12,809 13,740 15,046 15,348 15,689 16,224 Youth population, % of total working age 33.0 32.3 31.0 29.3 28.1 28.4 28.9 30.1 Youth population, total, '000 3,766 3,889 3,967 4,028 4,228 4,362 4,537 4,883 Pensionable population, % of total working age 16.8 18.1 18.6 19.2 19.9 20.9 22.7 25.5 Pensionable population, '000 1,914 2,185 2,388 2,635 2,994 3,209 3,568 4,134 f = BMI forecast; 0>15 plus 65+, as % of total working age population; 0>15 plus 65+; 15-64, as % of total population; 15-64; 0>15, % of total working age population; 0>15; 65+, % of total working age population; 65+. Source: World Bank, UN, BMI Table: Australia's Rural And Urban Population, 1990-2020 1990 1995 2000 2005 2010 2012f 2015f 2020f Urban population, % of total 85.4 86.1 87.2 88.2 89.1 89.4 89.9 90.6 Rural population, % of total 14.6 13.9 12.8 11.8 10.9 10.6 10.1 9.4 Urban population, '000 14,573.6 15,560.0 16,701.4 17,988.2 19,841.1 20,493.9 21,390.2 22,868.0 Rural population, '000 2,491.5 2,512.0 2,451.6 2,406.6 2,427.3 2,424.8 2,403.1 2,372.6 f = BMI forecast. Source: World Bank, UN, BMI © Business Monitor International Ltd Page 74 Australia Information Technology Report Q4 2012 BMI Methodology How We Generate Our Industry Forecasts BMI’s industry forecasts are generated using the best-practice techniques of time-series modelling. The precise form of time-series model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined. For example, data for some industries may be particularly prone to seasonality, i.e. seasonal trends. In other industries, there may be pronounced non-linearity, whereby large recessions, for example, may occur more frequently than cyclical booms. Our approach varies from industry to industry. Common to our analysis of every industry, however, is the use of vector autoregressions. Vector autoregressions allow us to forecast a variable using more than the variable’s own history as explanatory information. For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity. When forecasting for some of our industry sub-component variables, however, using a variable’s own history is often the most desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA). In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting. It must be remembered that human intervention plays a necessary and desirable part in all of our industry forecasting techniques. Intimate knowledge of the data and industry ensures we spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not. IT Industry Forecasts There are a number of criteria that drive our forecasts for each IT variable. IT forecasting is complicated due to the fragmented nature of the market, with little transparency of vendor data and low apparent agreement between many sets of figures in terms of market definition, base and methodology. In addition, forecasts are naturally affected by consideration of a variety of internal and external political and economic factors. © Business Monitor International Ltd Page 75 Australia Information Technology Report Q4 2012 Within best-practice techniques of time-series modelling, BMI’s quarterly updated forecasts are improved substantially by intimate knowledge of the prevailing features of each local market. Individual variables taken into account in creating each forecast include: Overall economic context, and GDP and demographic trends; Underlying ‘information society’ trends; Projected GDP share of industry; Maturity of market structure; Regulatory developments and government policies; Developments in key client sectors such as telecommunications, banking and e-government; Technological developments, and diffusion rates; Exogenous events. Estimates are calculated using BMI’s own macroeconomic and demographic forecasts. IT Ratings – Methodology Our approach in BMI’s IT Business Environment Ratings is threefold. First, we seek accurately to capture the operational dangers to companies operating in this industry globally. Second, we attempt, where possible, to identify objective indicators that may serve as proxies for indicators that were traditionally evaluated on a subjective basis. Finally, we include aspects of BMI’s proprietary Country Risk Ratings (CRR) that are relevant to the IT industry. Overall, the ratings system, which integrates with those of all 16 industries covered by BMI, offers an industry-leading insight into the prospects/risks for companies across the globe. Ratings System Conceptually, the ratings system divides into two distinct areas: Limits of potential returns: Evaluation of sector’s size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development. Risks to realisation of those returns: Evaluation of industry-specific dangers and those emanating from the state’s political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. Indicators The following indicators have been used. Overall, the rating uses three subjectively measured indicators, and 41 separate indicators/datasets. © Business Monitor International Ltd Page 76 Australia Information Technology Report Q4 2012 Table: IT Business Environment Indicators Indicator Rationale Limits to potential returns Market structure IT market value, US$bn Sector value growth, % year-onyear (y-o-y) Denotes breadth of IT market. Large markets score higher than smaller ones Denotes sector dynamism. Scores based on annual average growth over five-year forecast period Government initiatives and spending Denotes spending boost provided by public sector, which can be a crucial determinant of sector development Hardware, % of total sales Denotes maturity of market. A high proportion of hardware sales – compared to services/software – indicates that the overall IT market is immature Country structure Urban-rural split GDP per capita, US$ Urbanisation is used as a proxy for development. Predominantly rural states therefore score lower A high GDP per capita supports long-term industry prospects. Overall score for country structure is also affected by the coverage of the power transmission network across the state Risks to potential returns Market risks Intellectual property (IP) laws ICT policy Markets with fair and enforced IP regulations score higher than those with endemic counterfeiting Subjective evaluation of official policy towards IT development, as enshrined in statute and tax code Country risk Short-term external risk Rating from CRR evaluates the vulnerability to external shock, which is the principal cause of economic crises. Such a crisis would cut investment Short-term financial risk Rating from BMI’s CRR, to denote risk of currency crisis and stability of banking sector. The former would hit revenue in hard currency, while the latter would curtail investment funding Trade bureaucracy Legal framework Bureaucracy Corruption Rating from CRR to denote ease of trading with the state Rating from CRR denotes the strength of legal institutions in each state – security of investment can be a key risk in some emerging markets Rating from CRR denotes ease of conducting business in the state Rating from CRR denotes the risk of additional illegal costs/possibility of opacity in tendering/business operations affecting companies’ ability to compete Source: BMI © Business Monitor International Ltd Page 77 Australia Information Technology Report Q4 2012 Weighting Given the number of indicators/datasets used, it would be wholly inappropriate to give all subcomponents equal weight. Consequently, the following weight has been adopted. Table: Weighting Of Components Component Weighting Limits of potential returns 70% – IT market 65% – Country structure 35% Risks to realisation of potential returns 30% – Industry risks 40% – Country risk 60% Source: BMI Sources Additional sources used in IT reports include national ministries and ICT regulatory bodies, national industry associations, and international industry organisations such as the International Telecommunication Union (ITU), officially released company results and figures, and international and national industry news agencies. © Business Monitor International Ltd Page 78 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... selection of 12 © Business Monitor International Ltd Page 22 Australia Information Technology Report Q4 2012 Dell computers were 41% more expensive on average in Australia However IT companies argued that higher Australian prices were not IT-industry specific They pointed to higher wages and distribution costs, and high prices charged by Australian channel agents Government programmes are a significant... in-house IT capabilities © Business Monitor International Ltd Page 28 Australia Information Technology Report Q4 2012 Telecoms companies such as Telstra and Optus have rolled out cloud computing service offerings from Australian datacentres Meanwhile, the majority of Australia' s top banks such as ANZ and the Commonwealth Bank of Australia have launched cloud computing strategies In 2010 an initiative... Northern Territory 1.3 1,303 computers delivered to 37 secondary schools 2,041 State New South Wales Victoria South Australia Source: BMI, official figures © Business Monitor International Ltd Page 31 Australia Information Technology Report Q4 2012 Industry Forecast In 2012, BMI forecasts Australian IT market growth of 4%, with spending of US$21.9bn, compared with US$20.8bn in 2011 According to our forecasts... software © Business Monitor International Ltd Page 12 Australia Information Technology Report Q4 2012 Table: Asia Risk/Reward Ratings Q41 2 Limits Of Potential Returns Risks To Realisation Of Potential Returns IT Market Country Structure Limits Market Risks Country Risk Risks IT Rating Regional Rank Singapore 57.0 100.0 72.1 70.0 85.1 79.0 74.1 1 Australia 60.0 95.0 72.3 80.0 72.9 75.7 73.3 2 Hong Kong... of Australian organisations already use cloud computing, according to an estimate by market research firm Frost & Sullivan CSC Australia launched cloud computing © Business Monitor International Ltd Page 26 Australia Information Technology Report Q4 2012 services from its Australian datacentres in July 2010 Vendors are looking for channel partners to help them offer cloud computing services to local... available in every administrative village in central © Business Monitor International Ltd Page 15 Australia Information Technology Report Q4 2012 and eastern China and every township in the west In Australia, the government's commitment to develop the National Broadband Network should further the development of Australia' s digital economy Meanwhile, the growth of Wi-Fi coverage will be one driver of notebook... for an escalation of its cloud strategy over the next few years In 2012 more leading Australian private and public sector organisations are expected to launched cloud initiatives and the government has adopted a six-year cloud computing strategy © Business Monitor International Ltd Page 21 Australia Information Technology Report Q4 2012 Market Overview Government Authority Government Authority Department... After the narrow victory of the Labour party-led coalition in Australia' s 2010 elections, the eventual decision to continue the development of the National Broadband Network (NBN) had positive implications for the future growth of the IT market © Business Monitor International Ltd Page 32 Australia Information Technology Report Q4 2012 In 2012, government projects in sectors such as e-government, healthcare,... initial core application areas, with around one-third of Australian organisations estimated to be using some cloud services © Business Monitor International Ltd Page 33 Australia Information Technology Report Q4 2012 New cloud computing offerings and increased competition in this segment are expected to fuel further demand from end-users for this technology The federal government has set out a timetable... depending on their exposure to the industry in each particular state For a list of the data/indicators used, please consult the appendix at the back of the report Source: BMI © Business Monitor International Ltd Page 13 Australia Information Technology Report Q4 2012 IT Markets Overview IT Penetration Across Asia, government ICT initiatives and growing affordability will help to Narrowband Penetration Per 100 . Copy deadline: October 2012 Australia Information Technology Report Q4 2012 © Business Monitor International Ltd Page 2 Australia Information Technology Report Q4 2012 © Business Monitor. Snapshot 71 Table: Australia& apos;s Population By Age Group, 1990-2020 ('000) 72 Australia Information Technology Report Q4 2012 © Business Monitor International Ltd Page 4 Table: Australia& apos;s. 78 Sources 78 Australia Information Technology Report Q4 2012 © Business Monitor International Ltd Page 5 Executive Summary BMI View: Australian IT sales are expected to reach US$21.9bn in 2012, up